Why Shareholder Agreements Matter

If your company has more than one shareholder, you need a shareholder agreement.

WHAT IS A SHAREHOLDER AGREEMENT

A shareholder agreement is a contract that regulates the obligations and rights of members of a company. It provides an important mechanism for governing issues not catered for in the company’s constitution or the Corporations Act.

Amongst other things, shareholder agreements cover:

exit strategies for members (i.e. agreements to sell shares on particular occurrences like an acquisition offer or on the death of a founder);

how company directors are appointed and removed;

the requirements and conditions of any shareholder loans;

the dividend distribution policy for profits of the company;

restrictions on competition with the company; and

how shareholders are obligated to spend time on company activities.

WHY SHAREHOLDER AGREEMENTS ARE A GOOD IDEA

Disagreements between reasonable people are usually caused by misunderstandings – disputes between the founders of technology businesses are a leading cause of failure.

The most important function of a shareholder agreement is to prevent disagreement. The process of drafting a shareholder agreement will always uncover important issues that co-founders have not considered (usually based on “what if” scenarios). When these issues are dealt with before there is something large at stake, they are always much easier to reach agreement on.

TAKEAWAY

If your company has more than one shareholder, a shareholder agreement is very important. It is a tool to prevent disagreement between founders.

Your email address will not be published. Required fields are marked *

Comment

Name *

Email *

Website

Schedule a free 15 minute Corporate & Commercial telephone call

Enter your details below to get in touch with a Corporate & Commercial expert

First Name:

Last Name:

Email:

Phone:

How Can We Help?

– We respect your privacy –

Client Reviews

"Smooth, affordable and manageable"

“We recently engaged Rouse Lawyers to assist us in purchasing our first home. The support we received from Jesse Mason and his team was invaluable, easing the overwhelming emotions of being first time homebuyers. He supported us to understand both the land and home contracts, walking us through the process and promptly responding to any concerns, which made the whole process smooth, affordable and manageable”.

Nick JohnstonHitachi Construction Machinery (Australia) Pty Ltd

"The team at Rouse Lawyers has been fantastic."

The team at Rouse Lawyers has been fantastic. As a new technology startup, we had some unique requirements around licensing and partner agreements, trademarking as well as off-shore contractor agreements. Matthew and Patrick have been great to deal with – not only from an advice perspective but also delivering these agreements in a timely manner. Dealing with Rouse Lawyers has allowed us to concentrate on our business knowing the legal side is in good hands.

Gareth Beachy-HeadHub3c

"We call upon Rouse Lawyers for their invaluable advice"

We have used Rouse Lawyers over the past 3 years, predominantly in our mergers and acquisitions activities. Matthew and his team understand the needs of larger family businesses, and their pragmatic and commercial approach to transactions is first class. From personal matters to large deals, we call upon Rouse Lawyers for their invaluable advice.